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US banks crush expectations, while markets wait on Coinbase

After an initially subdued start European markets have edged higher today, helped to a large extent by a turnaround in the travel sector.

EasyJet started us off this morning by saying it expected first half losses to be slightly less than anticipated, helping to give the shares an initial push higher on the day.

While this can obviously be construed as a glass half full story the losses are still expected to come in between £690m and £730m. This is largely due to a decrease in costs with cash burn in Q2 coming in at £470m. The airline said it expected to see a significant uptick in late May when overseas travel restrictions are relaxed, saying it would increase flight capacity to 20% of 2019 levels, up from 14% currently.

Passenger numbers are 89% down, to 4.1m, pulling revenues lower by 90% to £235m. Earlier this week HSBC suggested that EasyJet might need to raise fresh equity given the challenges posed by the UK governments new traffic light travel system. This morning’s update would appear to counter that narrative with the airline saying that it has access to £2.9bn of liquidity, having raised over £5.5bn since the beginning of the pandemic.

Having sold and leased back around 43 aircraft to raise cash already, they still have another 141 fully owned and unencumbered aircraft, which represents over 40% of its remaining fleet, so it certainly has plenty of room to boost its liquidity

In amongst all of this IAG shares are also higher after the sector got a lift from US carrier American Airlines, who said that they expect to fly more than 80% of their international capacity this summer, compared to 2019. This comes across as quite the contrast compared to EasyJet’s more modest 20% estimates; however, it does raise the prospect that international travel may well offer more of a respite for some airlines, and that any recovery could come somewhere in between.

Holiday Inn and Crowne Plaza owner Intercontinental Hotels Group shares are also higher, probably for the same reasons, with the likes of Accor also seeing decent gains.

LVMH latest results have helped the CAC40 push higher after Q1 sales beat expectations after reporting revenues of almost €14bn, a rise of 30%. It has also been helped by its recent acquisition of Tiffany, but even without this the fashion giant still managed to post a 52% rise in revenues in its fashion and leather goods division with China and the US leading the recovery.  

Tesco this morning reported a 20% decline in profits for its latest full year numbers, sending the shares sharply lower. This seems somewhat of an overreaction given the challenges faced by the business, and the fact that profits were still pretty healthy at £825m, despite the increase in costs, and the supermarket returning its business rates relief of £535m. In terms of the outlook Tesco said it expects sales volumes to decline as lockdown restrictions ease, however costs are also expected to decline as well. This should translate into better margins, and an increase in profits, which should head back to the levels seen last year.   


US markets opened mixed, before moving to the upside and new record highs for the Dow and S&P500, as investors mulled over the latest Q1 earnings numbers from US banking heavyweights JPMorgan and Goldman Sachs, both of which crushed expectations. The overall reaction was somewhat underwhelming, though that may be more to do with the fact that most of the outperformance was already in the price, in terms of the share price gains seen over the last few weeks.   

At its last set of numbers JPMorgan blew away consensus expectations on both profits and revenues, helped by a big increase in investment banking revenue, while net interest income decreased by 7% due to the flattish nature of the yield curve.

Today’s Q1 numbers have painted a fairly similar picture, crushing expectations, with revenues rising to $33.12bn, well above expectations of $30.4bn. Investment banking revenue came in above expectations coming in at $2.85bn, as did equities and trading revenue which rose to $3.29bn, while the steeper yield curve helped fixed income rise to $5.76bn. The bank also released another $5.2bn in loan loss reserves having done something similar earlier this year, as the US economy continued to show signs of improving. Provisions in respect of non-performing loans have now fallen to $25.5bn.  

The clouds on the horizon appear to be around loan demand which JPMorgan said was likely to remain challenged, while deposits rose 24% year on year to $2.3trn. This appears to be what is weighing on the shares in early trade, with so much money on its balance sheet it is struggling to lend it out, with higher rates impacting on housing loan demand, while small business lending fell 50% compared to the same quarter a year ago. Advisory fees also rose 43% coming in at over $1.1bn.

Goldman Sachs also followed a crushing performance in Q4 with a similarly crushing performance in Q1, with profits coming in at $18.60c a share, well above expectations of $10, while revenues also surged, coming in at $17.7bn, $5bn more than expected. The bank exhibited outperformance in all areas, with equites revenue up 68% to $3.69bn, and FICC revenue up by 31% to $3.89bn. There doesn’t appear to have been too much blowback in light of recent events around Archegos Capital and the aftermath of the blow up of this hedge fund.

Wells Fargo also beat expectations in their Q1 numbers with revenues coming in at $18.06bn and profits coming in at $1.05c a share. Unlike JPMorgan and Goldman, they are much more domestically focussed with the bank also citing weaker loan demand, despite an improving US economy. The numbers were also boosted by the release of $1.6bn from loan loss reserves.   

With Bitcoin, Ethereum and other cryptocurrencies trading at or close to record highs, all eyes are on Coinbase today as it lists on the Nasdaq, the shares set to rise sharply from the $250 reference price, with early expectations that we’ll see the shares open above $350.

Moderna shares are also higher after new data showed that the jab is 90% effective six months after the second dose is administered, while Johnson and Johnson shares are slightly softer, after yesterday’s jab suspension from the US FDA.   

Discovery shares are lower after it was reported that Credit Suisse had sold more blocks of shares from its Archegos Capital exposure.  

In stark contrast to airlines based in Europe, American Airlines said that it expects to fly more than 80% of its international capacity this summer compared to 2019.


The US dollar has come under further pressure today falling to a three-week low against the euro. The euro appears to be getting a little bit of a bid from comments from Bank of France governor Villeroy this morning, when he said the ECB could be in place to exit the PEPP program by March 2022. Other governing council members also appear to be thinking along those lines as well, in stark contrast to the Federal Reserve, where policymakers appear to be in no rush to ease back on support. This ambivalence is also helping support commodity currencies which are also outperforming sending the Australian dollar to three-week highs.


Crude oil prices have continued to rise after US API inventories showed a bigger than expected decline as demand continues to show signs of picking up, and optimism grows about the US economic recovery story. Weekly inventories showed a fall of 5.89m barrels sending Brent prices back above $66 and a three-week high.

Bitcoin prices hit another record today at $64k, along with other crypto currencies which have also seen a big increase in buying interest in the past few days, ahead of today’s debut of Coinbase on the Nasdaq index. We’ve also seen record highs in Ethereum, Litecoin and a number of other smaller tokens. These moves have also helped push the CMC Major Crypto index to new record highs.

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